FCC’s wishy-washy rulemaking might doom net neutrality in court

Judges cast a suspicious eye at FCC's justification of Open Internet Order.

When the Federal Communications Commission (FCC) adopted the Open Internet Order in 2010—forbidding Internet Service Providers from blocking services or charging content providers for access to the network—there was one thing the commission was careful not to do.

What the FCC did not do is declare that Internet service providers are "common carriers," a classification that could have opened the door to even stricter regulations. Pre-dating the Internet by centuries, common carriage is "this age-old doctrine that says the person doing the shipping for you can't mess with the contents," said Matt Wood, policy director for Free Press, a group that advocates for "universal and affordable Internet access."

The FCC has avoided calling ISPs common carriers for more than a decade, favoring a "light touch" regulatory approach that could protect consumers while (hopefully) appeasing political foes of net neutrality, Wood said.

That approach may be backfiring. Verizon recently challenged the legality of the Open Internet Order, and yesterday the company argued its case in front of a three-judge panel at the US Court of Appeals for the District of Columbia Circuit. A Verizon win would allow ISPs to block content or charge providers for a faster lane to customers.

Judges are skeptical of FCC reasoning

Wood is hoping the judges will uphold the Open Internet Order, but he believes that the FCC would be having an easier time defending itself if it declared ISPs common carriers in the first place. Most of the two-hour court session focused on the common carriage issue, he said.

The concept that "the person doing the shipping for you can't mess with the contents" is "what I think most people want to have out of their Internet service if they're getting it from Verizon or from AT&T or Comcast or somebody else who provides that wire," Wood told Ars. "They don't want to give in to Verizon's claim that the ISP somehow has the right to edit the Internet and pick and choose where you can go and what you can say. The FCC has left that in doubt too much from its authority choices."

While not proclaiming ISPs to be common carriers, the commission said it can make rules that sound similar to common carrier regulations because of the FCC's legally mandated responsibilities to promote broadband deployment and adoption, to make sure video services are competitive, and to make sure wireless carriers serve the public interest.

Wood and others who observed the judges' interactions with Verizon and FCC lawyers yesterday agree that the judges expressed skepticism about the FCC's argument that the Open Internet rules don't amount to common carriage-style regulations. Telecom analysts at Stifel sent a note to clients saying that the court seems likely to let ISPs charge for premium Internet links.

"We believe a DC Circuit panel majority signaled today at oral arguments that it’s inclined to pare back FCC Open Internet rules in a way that would allow cable and telco broadband providers to charge Internet edge providers for improved connections to broadband customers," Stifel wrote. "At the same time, the panel seemed inclined to uphold the FCC’s authority to regulate broadband to some extent. … Such an outcome could give telcos and cable new flexibility to strike paid-prioritization deals for offering better service to Internet edge providers (e.g., Google, Amazon, Netflix), which could also include media companies (e.g., Disney, Fox, CBS, Viacom, Time Warner Cable). Whether it would be good or bad for edge/media providers would depend on their business plans and financial wherewithal, but it could create faster 'toll' lanes that give big edge players advantages over upstarts."

The judges didn't seem that interested in Verizon's argument that it has a First Amendment right to block content on its network, writes Harold Feld, senior VP of advocacy group Public Knowledge. However, Feld continues:

Verizon’s other argument, that the statute [of the Communications Act] prevents the FCC from regulating it as a “common carrier” when it provides broadband service, got the bulk of the attention. Verizon argued that the “no blocking other people’s websites or applications” and “no (unreasonable) discrimination against other services or content” treated Verizon’s internet service as if it were a phone service—something Verizon says the Communications Act prohibits.

The FCC argued that edge providers (sites and services that Verizon's subscribers access) were not customers of Verizon, and that Verizon was not selling them any service. Verizon’s customers are end users (e.g., individual customers and businesses buying broadband access service). The customer requests Verizon get the specific information or runs a specific service, which Verizon then can do however it wants (provided it does not block the service outright, demand some kind of second payment from the content provider/edge service, or otherwise discriminate).

Judge [Judith] Rogers appeared to be most sympathetic to the FCC’s argument that because the edge providers are not Verizon’s customers, the “no common carriage rule” does not apply. Judge [David] Tatel and Judge Silberman clearly agreed with Verizon that if Verizon had to give users access to someone else’s website or service, then that third party was getting a “free ride” on Verizon’s network. Where Judge Tatel and Judge [Laurence] Silberman disagreed, however, was whether the “no common carrier rule” allowed the FCC to require some kind of basic free transport, but could not prevent Verizon from negotiating separately with Google to give Google better service than, say, Bing.

Judge Tatel seemed to say that as long as Verizon was free to offer Google better service than Bing, that the FCC could prevent Verizon from blocking Bing altogether. Judge Silberman seemed to think that if the Communications Act requires that Verizon has to be able to offer better service to Google, then it also requires that Verizon be free to block Bing (or any other search engine) altogether.

A ruling could come before the end of this year. The court could dismantle the entire Open Internet Order, let it stand completely, strike down part of it and let other parts stand, or just remand it back to the FCC for further explanation. The FCC could also pursue new net neutrality rules after the case within whatever boundaries the court sets.

Public Knowledge VP Michael Weinberg wrote that an FCC loss could "force edge providers to pay ISPs a toll every time one of the ISP’s subscribers wanted to access the edge provider’s content. In other words, if your ISP doesn’t have a special deal with the website you want to visit (or if the website you want to visit is in a 'premium' tier that you haven’t paid for), it may not work."

Feld acknowledged that judges' statements in oral arguments don't necessarily translate to rulings. But he believes that "Judge Rogers seemed most likely to affirm the FCC and the rule. Judge Tatel wanted to eliminate the non-discrimination rule but keep the no blocking rule. Judge Silberman wanted to get rid of both the no blocking rule and the no discrimination rule—although he would be happy to get rid of all the rules because the FCC did not make an explicit finding of 'market power.'"

Net neutrality foes feeling confident

Tech Freedom, an advocacy group that opposes the Open Internet Order, expressed confidence that the order will be gutted after yesterday's hearing. If the court determines that the net neutrality law imposes common carrier regulations on broadband ISPs, "the FCC will lose, no matter what the court thinks of the Commission’s sharply contested claims of authority under the Telecommunications Act," the group said.

Tech Freedom noted that case law has shown that the FCC "has significant latitude to determine the bounds of common carriage," but that "if a carrier is forced to offer service indiscriminately and on general terms, then that carrier is being relegated to common carrier status."

"The Open Internet Order requires broadband ISPs to make their networks available and to do so on equal terms that remove pricing flexibility, to any edge provider that wishes to have its content available on an ISP’s network," Tech Freedom wrote. "If that isn’t, in effect, a requirement that ISPs hold out their networks 'indifferently for public use,' it’s hard to imagine what is—as Tatel certainly seemed to think today."

The FCC argued in a court filing that these aren't common carrier regulations because "Verizon is free to offer or decline to sell broadband Internet access service to any end user. Verizon need not hold itself out to offer service indifferently to anyone. The only things that Verizon (and other broadband Internet access providers) cannot do are blocking its end users from reaching lawful content and charging edge providers to allow end users to reach them."

FCC could have taken a different path

The commission could re-classify ISPs so that they are subject to common carrier regulations and trust that the courts would respect its authority to make that decision. But political pressure from members of Congress helped prevent the FCC from doing that in 2010.

This has left the FCC with a tough task in defending the net neutrality rules. "We said all along we thought the FCC should have gone with the stronger authority route and not left it open for these kinds of legal gymnastics," Wood said. "I'm not rooting for the FCC to lose by any stretch, but I'm not surprised they're having trouble over the authority path they've tried to carve out here."

The FCC surely would be facing challenges even if it had declared ISPs to be common carriers. But, "if you're going to get sued anyway you might as well go in with your best argument," Wood said.

Promoted Comments

If an ISP actually started blocking access or charging sites for preferred access through their networks, I would like to see Google Netflix Amazon eBay Facebook etc etc change page to "Due to suboptimal performance, this service is not available for use on Verizon services. Please reconnect with another service provider for access."